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Is the FTSE a Tory?

June 1, 2017 09:39
Is the FTSE a Tory?

The FTSE is a Tory?

10th April 2005

I started off this week saying that I wasn’t a political animal and yet I have ended the week as I started it by writing about the forthcoming general election.

But as usual it’s not the actual election that interests me, purely the effect it has on the wealth of the nation and so I was intrigues, when I read this week about some research from the Leeds University Business School. They have analysed the stock market before and after recent elections to see how it reacts. This was prompted by a jump of 87 points in the FTSE since Tony Blair announces the next election day as May 5th.

This jump in the FTSE in the period leading up to the election is a common effect of an election announcement but the market reacts more strongly to a Conservative win than a Labour one.

The stock market has risen immediately following 7 out of 8 Tory victories since 1945, but has fallen in 5 out of 8 Labour victories in the same period. In fact, the largest fall was of 7.1% of the index after Labour’s win in 1974.

I suspect that this is for two reasons: firstly, a Conservative government has traditionally concentrated on the economic policies whilst Labour has traditionally concentrated on the social issues (though they suggest that this isn’t really the case anymore): but secondly I suspect that this is partly due to the beliefs and behaviours of the people who run, manage, and effect the stock markets- because I suspect that there are a greater number of Conservatives working in that arena and their personal delight at the Tory win probably overspills into a greater confidence in the market- which pushes prices up.

Once again- and as I teach every week – financial movements are a balance of factual information combined with beliefs and behaviours of the people involved.

Have a great weekend.

Is 16.3% Enough?

May 23, 2017 10:13
Is 16.3% Enough?

Is 16.3% Enough?

March 1st 2005

There was an absolutely fantastic advert on the back of The Sunday Times this week for that old established investment group, M & G. The advert was brilliant; it included many of my own standard investment rules of thumb, it was interesting to read- and it had pictures in it (always a plus for us visual communicators)!

There were enough points to note that I could resent a whole course about it – in fact if you didn’t see it don’t worry as I have already cut it out and made 15 pages of notes on it- so it WILL be popping up in my future courses.

But the one I wanted to highlight today was the fact that the M & G Recovery Funds has returned 16.3% per annum since 1969. Staggering, and what a phenomenal performance, and the ad compares that return to that produced by the FTSE in that same time, which was a supposedly pathetic 11.7%.

I highlight these statistics because I am presented time and time again with people who compare the returns from property to that of returns from equities and they believe that equity returns are much worse than those for property. However, I know, and this advert proves to us, that the returns for both equities and property – over time – are generally about the same.

So most people accept quite easily that you can make 16.9% per year from property but don’t believe it can be done with equities – but as this lovely advert proved to us – oh yes it can!

The January Share Indicator

May 19, 2017 09:22
The January Share Indicator

The January Share Indicator

February 9th 2005

 

The first two weeks of share trading in January always give us a pretty strong signal for the rest of the year. The share prices in the first part of the year are always closely monitored for the ‘January Indicator’ as the old stock market adage is that “As January goes, so goes the year”, and hence the rise in prices in January 2005 indicate that the rest of the year will see an increase in share prices generally.

Hoorah!

So can we rely on the January Indicator? It seems so, as it has been right in more than 3 years out of 4 since 1919 – and that’s good enough for me. Which leads me to also comment on the odds or risks taken when trading in shares.

Nobody – not even Warren Buffet – is right all the time and all we can do is to take the best guess we can at any given time using the knowledge and experience that we have, and then go with it. There is no point in over analysing any deal or in adding any emotion to the potential trade. All you can do is to determine what stocks to buy and sell given your chosen criteria and then just do the deal.

The string investor accepts that there will always be the new piece of information that makes the buying or selling decisions right or wrong but if we wait until every piece of information is received the deal will be gone.

So take this statistic here provided by the January Indicator and use that as a piece of strong evidence to look positively at the Stock market for 2005.

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